Online Bank Accounts and Savings Options To Keep Your Money Safe

We’re all looking for some good ideas about where to stash our cash during a time of uncertainty. The economic downturn has prompted a lot of us to seek safety in conservative accounts, so I am providing some ideas beyond the traditional brick and mortar banking options that are available, along with some updates on our favorite online bank accounts.

In light of the economic downturn and low interest environment, many are exploring various banking options for saving and securing their assets. Here are some of the choices:

Online Bank Accounts

The following are high yield savings account options which are well-favored and highly popular among online customers; they offer some of the best returns for the money you’d like to keep safe:

EverBank:The EverBank Yield Pledge Money Market Account yields a .91% APY for the first 3 months after you open an account. Following this, you’ll earn .91% APY for the first year. There are no fees on this account but there’s a $1,500 initial deposit required.

Ally Bank: This online bank has several savings products including the the Ally Bank Online Savings Account, which returns a .89% APY (Updated 1/09/12). This account has no fees and there’s no minimum balance to apply.

FNBO Direct:The FNBO Direct Online Savings Account currently offers a reasonable 0.70% APY. You won’t pay any monthly fees on your account and no minimum balance is required. This is a good place to park your money without the extra conditions that a lot of other banks require. Here’s where you can open an account.

ING Direct: A real favorite among many financial sites is the the Electric Orange Account, which presently yields .20% to 1.10%. This account has no maintenance charges or fees, and for a checking / savings account, it allows you to earn interest no matter what your balance is. Check here for more details.

Aurora Bank: This bank has a lot of offerings, ranging from mortgage products as well as a savings account, money market account, checking account and certificates of deposit. The rates for various accounts are quite competitive, relative to the products offered by other banks.

Zions Bank: This bank has several well regarded savings accounts, including the Zions Savings Account, which currently returns 1.06%. This account is very low cost and only requires a low balance to get you started. Other products include Zions Money Market Account and Zions Checking Account, which both have great features as well.

WT Direct:The WTDirect Savings Account will now give you a 1.11% APY with this caveat: for the first 60 days, you’ll earn 1.11% on your money. But after 60 days, if your account is under $10,000, your APY will be adjusted to 0.50%. To keep the 1.11% APY you’ll just have to maintain a balance of at least $10,000. There are also no fees and no limits.

Dollar Savings Direct: This division of Emigrant Bank offers the Dollar Savings Account, which yields a 1.00% APY. This account doesn’t have any fees, but has a minimum balance requirement of $1,000. Also, it can easily be linked to any checking account you have.

HSBC Advance:HSBC’s Online Savings Account will earn you 1.10% APY. Their fee structure is pretty similar to other online banks.

Bank of Internet: One of the highest yielding savings accounts we’ve come across is the one offered by the Bank of Internet. Their High Yield Savings Account returns - APY, and has no fees, no balance requirements, and allows for easy online transfers.

I believe that an online bank account isn’t THAT much different from having an account at the standard brick-and-mortar bank, and is actually my personal favorite for liquid savings. Frankly, I’m not all that concerned about failing traditional financial institutions (these accounts are FDIC insured), but do wish that interest rates were higher across the board. Compared to the rates we’re seeing for online savings accounts, I’m receiving a whopping 0.50% at one of my credit unions, while most typical banks are even lower!

Hence, whether or not you’re new to the world of saving money, these online bank accounts offer some strong incentives: many online banks (ING Direct and HSBC, just to name a couple) offer interest-bearing checking accounts starting at 1.2%, and high interest savings accounts in the 2% range.

My spouse fondly remembers the checking account he opened with the proceeds from his paper route that earned 12%. Those days are certainly gone, but there’s no reason to accept the meager rates traditional banks are offering these days — not when you can open an account that pays better in about 5 minutes while lounging in your jammies.

If you do opt for an online bank, I recommend retaining an account at a local bank or credit union for easy cashing of the odd checks that you may need to write or cash.

Here are other banking options to consider as well:

Credit Union Accounts

Among some of the benefits of storing your money in a credit union as opposed to a traditional bank:

They frequently pay higher interest on both savings and on interest-bearing checking accounts, as well as on money market accounts and CDs.

As not-for-profit institutions, credit unions are generally less interested in nickel-and-diming their customers with fees than are the totally-for-profit banks. My credit union account is fee free — the way it ought to be.

Many credit unions pay not only interest, but also dividends, to their account holders, as their account holders are their shareholders.

The National Credit Union Administration (NCUA), like its cousin FDIC, has also increased insurance protection of deposits from $100,000 to $250,000 through the end of 2009.

Money Market Mutual Funds (MMMFs)

Similar to the Money Market Deposit Accounts (MMDAs) offered by banks, this version is offered by mutual fund companies. Unlike the MMDA, the MMMF is NOT insured by the FDIC. Rather, the mutual fund company usually kicks in enough to keep the net asset value (NAV) at $1 per share.
The problem here is when the fund “breaks the buck”, or when the NAV drops below $1. This had happened only once in the 37-year history of money funds until the chaos that was September 2008. Since then, additional funds have joined the ranks of buck breakers. The United States Treasury has since announced an optional insurance program to back covered funds that pay a fee to participate in the program. They’re adamant about keeping that NAV at $1.

Cash Management Accounts (CMA)

This type of account is offered through a brokerage and consolidates investments while providing cash transactional features for affluent customers. The CMA allows the customer to earn higher interest than a standard bank account, but keeps the assets liquid. CMAs usually have annual fees, but these may be waived for accounts holders who maintain balances in excess of $50,000. The Securities Investor Protection Corp. (SIPC) protects funds up to $100,000 in a brokerage CMA, while the FDIC insures cash up to $100,000 in deposit accounts at bank-held CMAs.

There are certainly choices out there for folks who are wary of the traditional bank, and there are many more alternatives than those I’ve mentioned here. If you’re looking for something new, do your homework to find the option or combination of options that will work best for you.

Nice summary on savings alternatives. If you are looking at opening an online savings account for an amount less than the FDIC insured amount, you can do an easy online search for the best deal. You can even use an auction site delivering the best interest rate for your investment.

DESNovember 15, 2008 at 7:48 am

Thanks for the recap. They seem to have better rates on the savings accounts but there is that loss of looking someone in the face (face-to-face communication).

Financial FellowNovember 15, 2008 at 1:34 pm

Good article, Emily. A learned a couple things that I previously didn’t know. 1) Everything about Credit Unions. (I knew they existed but didn’t know, for example, that account holders are actually shareholders). 2) There were more higher interest paying companies out there beyond ING direct and HSBC. Thanks!

Thanks for the leads folks! Keep your tips in on where the best rates are and I can keep tabs on it here. 🙂 I believe Bankrate also offers some good information on this, if you’re interested in additional options.

Lisa PNovember 18, 2008 at 1:25 am

This is just my personal opinion, but I like using quick loans instead of savings to use for emergencies. I would use them for a lot of my needs.

With all due respect, Lisa P, but quick loans are a dumb idea. The best way to handle an emergency is — what else? — an emergency fund!

So save up enough so that when you do what you need to do — say surf in the ocean and you meet an unfriendly whale — you’ll be just fine with your insurance and emergency fund combination. Those should tide you over while you heal your wounds and abused ego (no thanks to that bully of a whale).

foglifterNovember 18, 2008 at 11:58 am

I’m surprised that GMAC Bank’s Online Savings account didn’t make it to the list. With 3.75% APY it should be listed as #1! I made the same comment on another money blog too. Also, GMAC recently removed $500 minimum balance requirements to avoid fees.

Roger HamiltonNovember 30, 2008 at 6:53 am

Might be good to keep some cash secretly stored away. You never know how bad a future crisis might be..

DanFebruary 26, 2009 at 9:51 am

Thanks for this article for enlightening us to keep our money during the crazy financial era and seeking financial input for our cash. Better save money wisely rather than spending it for nothing. Keep up the good work!

Cheryl WashingtonFebruary 26, 2009 at 5:09 pm

My online savings and checking accounts have been a godsend for my lifestyle. I was never able to make it to the bank to do business, due to their limited hours of operation. With online banking I have complete access anytime anywhere I need it.

Know It AllJuly 15, 2009 at 1:59 pm

nice post! You can’t scam money if you only have someone’s sort code and account number. That’s what is required for bank to bank transfers. Utilities companies provide such details for their accounts on the back of bills. If someone wanted to get into your account, they’d either have to get hold of your card details or hack into your account.

يوتيوبAugust 30, 2009 at 5:00 pm

My online savings and checking accounts have been a godsend for my lifestyle. I was never able to make it to the bank to do business, due to their limited hours of operation. With online banking I have complete access anytime anywhere I need it.

VizeSeptember 17, 2009 at 7:42 am

Might be good to keep some cash secretly stored away. You never know how bad a future crisis might be..

Madison MooreOctober 14, 2009 at 1:04 pm

As far I know, among all of the above mentioned banks HSBC is the most reliable one. I have also heard about ING and Ally, they are also quite good. Opening an online account with these banks is quite simple, it saves a lot of your time. I opened my online saving account in Citi bank. Their process is also very simple. So, in short there is no much risk opening an online account.

SimonDecember 16, 2009 at 7:36 am

Great post, really informative. I used to keep my savings in a box beneath the floorboards but we moved, and there was nowhere to put it in my new place. So I was forced to put it into a savings account but I’m glad I did as the interest rate was sky high, and fixed for a year!

ScentsyMarch 3, 2010 at 5:28 pm

I’ve had ING for about 4 years now, no problems! I love them!

Don @ currency day tradingApril 27, 2010 at 4:16 pm

My tip: Do not put your money in the bank; and don’t put it in your sock and then under your mattress…

With the recent banks falling over, I am not happy with my cash in the bank. But putting it under my mattress, sadly, isn’t a good solution either…. What if there is a fire…? I would have to think “just for a split second… sorry honey” if I should first save the wife or my money.

And now the real tip: Open accounts in several banks; if something bad is in the news re the bank where your money is, then quickly transfer it to one of your other banks.

I know this is bad practice and if all customers of a bank follow this advice, it could push the bank into bankruptcy… but better safe than sorry….!

Danni BarrowJune 9, 2010 at 11:25 am

I keep my savings in an account at a credit union across town so its really inconvenient for me to take money out. I’ve been saving for 14 years no problem this way.

AqeelJune 23, 2010 at 1:48 pm

Online banking account can save you a lot of time as you can do transactions from home or any place.